Whether you are starting a new job or moving to a place without reliable transportation, getting a new car can be a big decision. Picking the make and model of your new vehicle is exciting. Yet it can be a daunting expense to take on. An important step in the process is finding financing at the best rate. Here you can compare three potential auto loans to get the best savings. You can also find out the difference between interest rate and APR.
Your low interest financing
Your auto loan payment can vary based on many factors. In some instances, it may be easier to get financing through the dealership, but may be more cost-effective to explore other financing options. Comparing all aspects of your offers can help you pinpoint the best deal. Some auto loans may come with low-interest rates to hide high closing fees. Taking a look into the APR can provide more insight to the cost of borrowing.
What is an APR?
Dealerships and creditors will offer different interest rates and fees associated with borrowing money for a car. This can make it difficult to understand exactly how much the auto loan will cost you. The annual percentage rate on a vehicle loan is higher than the interest rate. That’s because the APR factors in all fees, such as registration and doc fees, in addition to the interest. By summarizing these costs you can then understand the cost of borrowing more effectively than just checking interest rate alone.
What are the extra fees on an auto loan?
There are different fees associated with the lease/purchase of a car, and different fees associated with borrowing money for a car loan. Some of the applicable fees on top of the MSRP may be:
State taxes: Taxation levels may vary by state, but most states will collect some amount of tax for auto leases and purchases.
Vehicle Registration Fees: When purchasing a vehicle, it must be registered and put on title, and the cost of the license plates must be covered. This will give you legal proof of ownership and is a service offered directly through the dealer. The more expensive the car, the higher the fees will be.
Doc fees: This is the administrative fee charged by the dealership for preparing the sales contract and other paperwork. Some states have a cap on the doc fee, while other states are unregulated. It is therefore important to ask about the documentation fee early in the buying process. Some dealerships sell the car at a great price but mark up the costs in doc fees. Costs generally range from $80 in capped states, up to $800 in other unregulated areas.
Other fees: Other potential fees can come in the form of dealer fees and advertising fees. These fees may be defined as shipping, or dealer prep, or could be a charge from the manufacturer to the dealer.
Service packages: You may be given an option for different service packages that may offer longer warranties or greater service coverage. With better service coverage and longer warranties come greater costs.
Origination fee: If getting financing from an outside creditor there may be lender fees for securing the loan. These fees are usually equivalent to 1% of the loan amount.
What is this calculator for?
The low interest financing savings calculator is very easy to use. It is designed to help you compare your financing options. It requires some basic info about your auto financing needs. This pertains to the balance of the auto loan, any down payments or trade-ins, the term length, and your financing options. Most of these details can be found through a simple online search.
Once this is added to the system, you can compare your monthly payments and interest rates for each loan. This calculator is also able to factor in residual lease payments to help you get the full picture.
How to use the calculator
The calculator has two parts: the information intake and the results. Before getting started, you should be familiar with your auto loan offers.
Step 1: You can start by adding your auto loan balance to finance in the first line of the calculator. This is the total balance after taking into account all taxes and fees. Do not subtract your down payment from the total balance to finance, as this will be accounted for on the next.
Step 2: Add your down payment to the second line of the calculator. You can factor in cash or the trade in value of your vehicle.
Step 3: On the third line of the calculator, you should add your term in months. You can choose any value between 12 months and 120 months.
Step 4: If you are planning to lease the vehicle, proceed to the last selection of how you want to finance my purchase. Select with a lease or with a loan.
Step 5: If with a lease is selected, the residual variable will be available for input. This is the remaining value of the vehicle once the lease is completed. The more car the car is worth at the end of the lease, the lower your monthly payment will be.
Step 6: Finally, you may compare up to three APR options on lines five, six, and seven.
Once this is added to the calculator you will receive your results in various formats. There is a prompt below the inputs of how much you can save by choosing the loan with the lowest APR.
Next, you can view a bar graph to compare your lease finance options. In the green, you will see your monthly payments respective to each APR, along with the total interest paid in blue. This direct comparison can show you the costs associated with each of your APR options so you can make an informed decision about your vehicle financing. In some cases, a higher APR may be a better choice if the dealership is closer to home but offers better service and warranties on the vehicle, and fits within your budget.
Remember to bookmark the low-interest financing savings calculator. You can save it to the home screen of your smartphone to access this tool as you get new offers. If you like this calculator or found this page useful, you can promote us using the share feature.